Singapore High Court Freezes Bored Ape Yacht Club #2162

Cryptocurrencies and digital collectibles may not be particularly legal in many countries. However, we are starting to see the interplay between the industry and many traditional institutions. Interestingly, a case involving NFT loans is already in the Singapore courts. A Singaporean citizen who owned Bored Ape used his NFT as collateral to obtain a loan on the NFTfi platform. According to court documents seen and reported by Bloomberg, the collector chose to use his Bored Ape because “its rarity and high value” would allow him to obtain a larger loan.

The NFT is question is BAYC #2162. The said piece stands out from others in the 10,000 units collection as the “only one wearing a beanie and has a jovial expression.” It is also one of the original apes since it was yet to be infused with mutant serum.

In mid-April, the Singaporean man used BAYC #2162 to collect a loan from an anonymous lender known as “chefpierre.eth.” According to the filing, the borrower obtained the loan, which included a short repayment period. And after the claimant failed to repay the loan on the maturity date, the lender took ownership of the NFT.

Looking at the trade history of the NFT on Nansen, we see that the initial owner of BAYC #2162 used NFTfi to initiate the loan process to chefpierre.eth. Chefpierre.eth has since interacted with BendDAO (another lending protocol) using the NFT.

Now, the borrower is claiming “unjust enrichment” on the part of the lender, noting that the BAYC NFT is “one of the claimant’s most treasured possessions, and is irreplaceable to him.”

Following his argument, the Singaporean court has stopped the sale of the NFT until the squabble surrounding its ownership is resolved.

“It is the first decision in a commercial dispute where NFTs are recognized as valuable property worth protecting,” said Shaun Leong, lead counsel for the case and equity partner of Withersworldwide. “So more than merely strings of numbers and codes imprinted on a blockchain, the implication is that NFT is a digital asset and people who invest in it have rights that can be protected.”

The case could set a legal precedent in the NFT field, as it is the first case involving an NFT ownership dispute. For once, the proceedings show that the law recognizes NFT as a form of property. Chris Holland, a partner at Singapore-based consulting firm Holland & Marie, explained:

“Having courts acknowledge a person’s potential ownership rights in an NFT is a positive for the industry […] It’s also a reminder to NFT buyers to be vigilant about the rights and control they give to third parties over an NFT. For example, it appears that the borrower does not know the ‘in real life’ identity of the lender. That creates a significant complexity for the borrower’s legal proceedings.”